Market Watch

Shaken and Slightly Stirred

Aug 16, 2013

Market Watch with Alan Brugler

August 16, 2013

Shaken and Slightly Stirred

The grain markets were shaken up a bit this week, with the bullish USDA reports on Monday followed by the preliminary but perceived as bullish Prevented Planting report from FSA on Thursday. USDA trimmed projected US corn and soybean production, and cut estimated ending stocks for corn, soybeans and wheat. The FSA report indicated 7.7 million acres of prevented planting claims, the largest since the 2011 flood year. Corn prevent planting was at 3.4 million acres, with soybeans at 1.6 million and wheat at 1.7 million. These were bigger numbers than expected, and fueled a rally on Thursday. The report was obviously incomplete, with less than 89 million corn acres shown as planted. The next update is scheduled for September 17.

September corn futures were up 8 cents per bushel, or 1.72% for the week. December futures were up 10 ¼ cents. The trade, particularly the spec funds, continues to be extremely bearish. The Commitment of Traders report on Friday showed the Managed Money category adding another 10,149 contracts to their net short position in the week ending 8/13. Weekly ethanol production rebounded while ethanol imports declined to 31,000 bpd. That allowed ethanol stocks to tighten. Weekly export sales were negative for old crop due to cancellations and rollovers to new crop delivery. New crop bookings were a strong 836,100 MT. Cumulative new crop export sales are the largest for this date since the mid-1990’s.

September soybeans were up 65 cents per bushel for the week. The bullish news was flowing all week. USDA trimmed projected 2013 yield by 1.9 bushels per acre and found 540,000 fewer planted acres ona special re-survey. New crop export sales were huge for the week at 69 million bushels, reinforcing the notion that for much of the world the current prices are cheap enough to buy. Meal futures rose 4.7% for the week to support product value, and soy oil was up 3.2%.

Wheat futures managed gains for the KC and MPLS contracts, but Chicago was lower on unwinding of wheat/corn spreads that were not performing and were dumped by the spec funds. Wheat export sales continue to be excellent, with 47% of the USDA forecast for the year already on the books or shipped out. USDA hiked projected exports to 1.1 billion bushels in the Monday morning WASDE report, and tightened the projected ending stocks further to 551 million bushels.

Commodity

Weekly

Weekly

Month

07/26/13

08/01/13

08/09/13

08/16/13

Change

% Change

Sep

Corn

$4.92

$4.76

$4.66

$4.74

$0.08

1.72%

Sep

CBOT Wheat

$6.50

$6.61

$6.34

$6.31

($0.03)

-0.39%

Sep

KCBT Wheat

$6.915

$7.068

$6.973

$6.983

$0.01

0.14%

Sep

MGEX Wheat

$7.37

$7.41

$7.32

$7.37

$0.05

0.72%

Sep

Soybeans

$12.75

$12.13

$12.19

$12.83

$0.65

5.31%

Sep

Soybean Meal

$404.00

$385.20

$390.60

$408.80

$18.20

4.66%

Sep

Soybean Oil

$43.62

$42.49

$41.50

$42.81

$1.31

3.16%

Aug

Live Cattle

$121.80

$120.65

$122.50

$123.90

$1.40

1.14%

Aug

Feeder Cattle

$152.60

$153.73

$153.85

$154.78

$0.93

0.60%

Oct

Lean Hogs

$84.80

$83.95

$84.97

$86.62

$1.65

1.94%

Oct

Cotton

$85.37

$85.32

$89.05

$93.40

$4.35

4.88%

Sep

Oats

$3.31

$3.39

$3.59

$3.78

$0.19

5.15%

Sep

Rice

$15.89

$15.80

$15.19

$15.56

$0.37

2.44%

Cotton futures shot 4.88% higher for the week. USDA trimmed projected US ending stocks on Monday, and also world ending stocks. US ending stocks were trimmed to a projected 2.8 million bales, which would be the tightest stocks/use ratio since 2010. World ending stocks outside of China continue to tighten.

Cattle futures gained 1.1% for the week, extending the rally from the prior week. Feeder cattle were up 0.6%. The market continues to try to decipher the impacts of the Tyson decision on zilpaterol, particularly the effect on average carcass weights and overall beef production. On Friday, Merck announced that it was temporarily suspending sales of Zilmax to all customers as producers finish their current feeding cycle. Slaughter numbers are also declining as we head into the late summer low in On Feed numbers. Beef production this week was 3.7% smaller than the same week in 2012, and production year to date is down 0.9%. Wholesale beef prices were higher this week, with Choice up 2.9% and Select up 2.4% on a Friday/Friday basis. USDA reported weekly beef export sales had improved to 12,700 MT last week.

Hog futures hit new contract highs. Nearby hogs were up 1.9% for the week. The estimated weekly slaughter was 2.177 million head. That was up 7.8% from the previous week when there was some plant down time, but UNCH from a year ago. Pork production YTD is down only 0.2% from 2012. The pork carcass cutout value lost 1.76% this week. Picnics were under the most pressure, while rib prices firmed. The USDA weekly export sales report improved to 8,500 MT.

Market Watch

This should be a little calmer week than last week, with the monthly grain reports out of the way. USDA will release the usual weekly export inspections report and Crop Progress report on Monday, and the weekly Export Sales on Thursday. The monthly Cold Storage stocks report is scheduled for Thursday, and the monthly Cattle on Feed report will be released on Friday, August 23. The September grain options also expire on Friday.

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